Study: Affluent optimistic but cautious on holiday

A number of affluent American consumers are planning to cut back their holiday shopping this year and spend less in the fourth quarter, according to the American Affluence Research Center’s Fall ’09 survey.

The survey, which represents the wealthiest 10 percent of U.S. households based on net worth (average income $300,000, average net worth $3.1 million), reveals that 9 percent of respondents (more than 11 million U.S. households) will not buy any gifts this holiday season.

In addition, 59 percent of respondents will spend the same on gifts this holiday season compared with last year, 38 percent will spend less and 3 percent will spend more.

This results in a 5 percent decline among this affluent group in holiday gift spending this year, which is estimated at $2,400 per household, according to the survey.

Meanwhile, survey respondents are more positive about the economy than they were six months ago and believe future economic conditions, including the stock market and personal income, will improve over the next 12 months. Moreover, many of the 684 respondents see the recession ending in 17 months.

“The affluent are clearly more positive about the economy and their spending plans than they were six months ago”, American Affluence Research Center founder Ron Kurtz said in a media release. “However, most of these households will continue to be cautious about their spending because they do not expect to see a true recovery of the economy and their net worth for two years or more. This means it could be 2012 before we see them return to pre-recession levels of spending.”

Survey respondents also said their spending plans are generally higher than they were six months ago, but there is no significant increase in comparison to the prior year. Many respondents are reducing or deferring expenditures due to uncertainty about the current economic conditions and economic recovery, job security and compensation (76 percent versus 81 percent in the spring). Nearly half (48 percent versus 54 percent in the spring) said the reason for reducing or deferring expenditures is because “they want to spend less and save more.” This is particularly true among the younger respondents with higher levels of income but lower net worth.

The survey also found that concern about conspicuous consumption is not that prevalent. In fact, of those feeling self-conscious about having a better financial situation, only 18 percent (about 7 percent of respondents) have reduced/deferred expenditures because of concern about appearances. Nearly half (41 percent) said they have felt self-conscious about having a better or stronger financial situation than that of friends and family (this tends to be more prevalent among the higher-income, higher-net-worth and younger segments), while 34 percent said they have felt self-conscious about having a worse or weaker financial situation than that of friends and family (this tends to be more prevalent among the lower-income, lower-net-worth and younger segments).

Other key findings from the survey indicate that 20 percent of the affluent have not reduced their spending, and of the 80 percent who have, about 25 percent will not return to pre-recession levels of spending.

In addition, respondents’ recovery of net worth (the stock market, the value of their personal savings and the value of their home) is the key to a return to pre-recession levels of spending, while 5 percent say easier credit will be important to increased spending.

Other economic indicators derived from the survey show that:

* An unemployment rate of 8 percent is not expected for 21 months.
* The Dow Jones Index will not hit 11,500 for 22 months.

* It will take 26 months to see a 20 percent increase in the value of respondents’ savings.

* A 20 percent increase in the value of respondents’ homes is not expected before 28 months.

The American Affluence Research Center conducted this survey in September 2009.

— Nielsen Business Media